Ameren Corporation (AEE) is scheduled to report third-quarter 2014 results before the opening bell on Nov 6. Last quarter, Ameren Corporation posted an 8.77% positive earnings surprise. Let’s see how things are shaping up for the third quarter.
Factors to Consider This Quarter
St. Louis-based Ameren Corporation generates and distributes electricity and natural gas to residential, commercial, industrial and wholesale end markets in Missouri and Illinois.
The U.S. summer was largely milder this year. Lower demand for utility services will distress Ameren Corp’s earnings this quarter.
In addition, Ameren’s planned 2014 Callaway Energy Center nuclear refueling outage and increase in operations and maintenance and depreciation expenses will further shrink the company’s margins.
However, after exiting from its merchant generation business, Ameren Corporation has been steadily focusing on its rate-regulated utilities. The company’s core utility business is now expected to provide modest earnings accretion on the back of increased rate relief, which came into effect this year.
Earnings Whispers?
Our proven model does not conclusively show that Ameren Corporation will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.81%. This is because the Most Accurate Estimate is at $1.25 per share and the Zacks Consensus Estimate is at $1.24 per share.
Zacks Rank: Ameren’s Zacks Rank #4 (Strong Sell) when combined with a +0.81% ESP makes an earnings prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the utility space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
NRG Yield, Inc. (NYLD) has an earnings ESP of +75.44% and a Zacks Rank #1 (Strong Buy).
Consolidated Edison, Inc. (ED) has an earnings ESP of +2.80% and a Zacks Rank #2 (Buy).
Duke Energy Corp. (DUK) has an earnings ESP of +0.66% and a Zacks Rank #3 (Hold).
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